Environmental protection equipment has received a number of policy support. 1. On January 21, the Ministry of industry and information technology and other three departments jointly issued the action plan for high quality development of environmental protection equipment manufacturing industry (2022-2025). The plan proposes that by 2025, the technical level of the industry will be significantly improved, and the output value of environmental protection equipment manufacturing industry will reach 1.3 trillion yuan. Strengthen the research and development of solid waste treatment devices and effectively improve the municipal sludge treatment capacity; Strengthen the transformation of industrial sludge and improve the resource level and efficiency. The plan encourages the technological research and development of solid waste treatment devices and the deep recycling of hazardous waste treatment; Through the breakthrough of key short board technology, improve the supply capacity of low-carbon environmental protection technology and equipment products, and orderly promote industry integration, so as to cultivate leaders in subdivided fields and benefit environmental protection equipment manufacturing enterprises. It is recommended to pay attention to 1) the Zhejiang Weiming Environment Protection Co.Ltd(603568) with outstanding roe and rapid growth of equipment sales revenue; 2) World class membrane equipment manufacturer and supplier Beijing Originwater Technology Co.Ltd(300070) . 2. On January 22, the Ministry of ecological environment issued the ecological environment monitoring plan for the 14th five year plan. The plan proposes that by 2025, the high-quality inspection network will be basically improved, the supervision system with the pollutant discharge permit system as the core will be basically formed, and the water environment quality inspection ability will be further strengthened. The plan points out that the monitoring and testing of water environment will be gradually systematized and transparent, and the standards will be more strict. The water environment supervision policy is becoming stricter, and the industrial space of sewage treatment services and sewage treatment equipment is expected to be further opened, which is beneficial to the head sewage treatment company and water treatment equipment manufacturer. It is recommended to pay attention to 1) Hongcheng water industry with great potential in Jiangxi sewage market and attractive valuation and dividend rate; 2) World class membrane equipment manufacturer and supplier Beijing Originwater Technology Co.Ltd(300070) .
The financing has recovered, the space is broad, and the value of environmental protection allocation is prominent. Since 2019, the interest rate has dropped, state-owned assets have taken ownership, and the debt financing of environmental protection enterprises has improved significantly. The new refinancing regulations have been issued to solve the difficulties of enterprise equity financing and eliminate the most important factor of suppressing PE in the sector. In 2019, the total amount of environmental protection special bonds was 54.6 billion yuan, with a total of 232.4 billion yuan in 2020 and 212.8 billion yuan as of October 29, 2021; Since 2020, the proportion of environmental protection special bonds has increased: in 2019, the proportion of environmental protection special bonds has increased to 2.5%, 6.3% in 2020, and further increased to 7.5% by October 29, 2021. The Fifth Plenary Session of the 19th CPC Central Committee unswervingly adheres to the construction of ecological civilization. The goal is to achieve new progress in the ecological environment during the 14th Five Year Plan period, achieve a fundamental improvement in the ecological environment by 2035, and the industry itself has broad growth space under the catalysis of the great protection of the Yangtze River and the Yellow River Basin and waste classification.
Valuation bottomed out, focusing on stable operating assets and companies with reversed fundamentals. Over the past three years, the performance of the environmental protection sector has been sluggish, and the valuation and positions are still low. The introduction of environmental protection REITs provides new equity financing tools. Pollution control operations such as urban sewage and waste treatment, solid waste and hazardous waste treatment are key industries. Enterprises with strong technical advantages and high wall barrier are favored. 1. Waste incineration companies with strong growth and certainty, Focus on Zhejiang Weiming Environment Protection Co.Ltd(603568) (ROE industry-leading and sufficient orders), Grandblue Environment Co.Ltd(600323) (steady growth and obvious valuation advantages); 2. Hazardous waste disposal companies with rich projects in hand, strong technology and high barriers pay attention to Zhefu Holding Group Co.Ltd(002266) (new leader of hazardous waste and layout of the whole industrial chain), Beijing Geoenviron Engineering & Technology Inc(603588) (leader of soil remediation benefiting from financing improvement); 3. Water companies whose value is expected to be revalued pay attention to Hongcheng water industry (Jiangxi sewage market has great potential, and the valuation and dividend rate are attractive).
Industry news: 1) the four ministries and commissions jointly issued the construction plan of major ecological protection and restoration projects in the northern sand prevention zone (2021-2035); 2) The Ministry of industry and information technology and other three departments issued the action plan for high quality development of environmental protection equipment manufacturing industry (2022-2025).
Plate Market Review: the environmental protection sector performed poorly this week, losing the market and the gem. Last week, the Shanghai Composite Index rose by 0.04%, the gem index rose by – 2.72%, the environmental protection engineering and services (Shenwan) rose by – 3.36%, underperforming the Shanghai Composite Index by – 3.40% and the gem by – 0.64%; Public utilities rose by – 0.68%, underperforming the Shanghai Composite Index by – 0.72% and outperforming the gem by 2.04%. Monitoring (- 2.78%), atmosphere (- 2.68%), water treatment (- 4.04%), solid waste (- 1.98%), water operation (- 2.91%), energy saving (- 2.79%).
Risk tip: the environmental protection policy and supervision are less than expected, and the industry demand is less than expected.
